Job growth falls short

The Labor Department's monthly tally is less than half the number expected by economists, though the unemployment rate falls.

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By NELSON D. SCHWARTZ

capecodtimes.com

By NELSON D. SCHWARTZ

Posted Jan. 11, 2014 at 2:00 AM

By NELSON D. SCHWARTZ

Posted Jan. 11, 2014 at 2:00 AM

» Social News

The U.S. economy created just 74,000 jobs in December, the slowest pace in three years, disappointing both economists and policymakers who had concluded that the labor market was finally gaining some sustained momentum.

Experts had expected the economy would add just under 200,000 positions in December, and the huge shortfall also stood in sharp contrast with the overall pace of job creation in 2012 and 2013. In those years, employers added an average of 182,500 positions a month.

Just last month, the Federal Reserve announced it would begin pulling back on its enormous stimulus program after several months of healthier job gains. But the latest data calls into question whether the central bank's optimism was premature.

The unemployment rate seemingly improved in December, falling to 6.7 percent from 7 percent in November. But there was a 0.8 percentage-point plunge in the labor participation rate, meaning that people were dropping out of the workforce rather than finding new jobs.

Although some sectors, like retailing, posted decent gains, other sectors that had been healthy during 2013 reversed course in December, significantly lowering the overall performance of the job market.

For example, the construction industry lost 16,000 jobs in December, a sharp reversal from the 2013 average monthly gain of 10,000 jobs. Similarly, health care employment fell by 6,000, compared with monthly gains of 17,000 in 2013 and 27,000 in 2012.

The average workweek in the private sector fell to 34.4 hours, a drop of a tenth of an hour and another sign of weakness in the broader economy.

"It's an ugly report," said Guy Berger, U.S. economist at RBS Securities. "We're still digging through it, but it's hard to explain the magnitude of the miss."

Wintry weather did have some effect, it was clear. Government statisticians reported that 273,000 people were prevented from going to their jobs last month, the most since December 1977 and nearly 100,000 more than is typical for December over the last decade.

Even if colder temperatures inhibited hiring somewhat, that's not enough to account for all of the weakness, Berger said. The last time the results of the payroll survey fell so far short of expectations was in November 2008, just as the economy was falling deeper into recession after the collapse of Lehman Brothers.

To be sure, month-to-month volatility in the payrolls report is common, and the numbers could be revised upward in the future. For example, the Labor Department revised the number of jobs created in November to 241,000 from 203,000.

"You do get misses like this every once in a while," Berger noted. Still, he said, the continuing drop in the labor participation rate was striking. The overall labor force has shrunk by about 550,000 just in the last 12 months.

Other economists, like Ian Shepherdson of Pantheon Macroeconomics, suggested that the December data represented a statistical outlier, not a signal of another so-called swoon as has occurred repeatedly since the fitful recovery began in mid-2009.

"Ignore the wild payroll number," he said in a note to clients. Indeed, he said he did not expect the December figures to alter the Fed's tapering course when policymakers next meet at the end of January.